Transcript 11. Gatt$wto - Midlands State University

11. Gatt$wto
• GENERAL AGREEMENT ON TRADE AND
TARRIFS (GATT)
• In the pursuance of global prosperity western
countries formed GATT as a multilateral trade
regime that set rules affecting member states.
• The organization also provided major
framework for multilateral tariff reduction
negotiation since the WW2. It primarily sought
to promote world trade and the world
economy through reduction of trade barriers.
11.1
• At its inception GATT was not intended to be
permanent i9nternational org but only to provide
a temporary framework for tariff negotiation
pending the establishment of international trade
organisation
(ITO)
under
UN
auspices.Consequently, the UN conference on
Trade and employment which at Havana Nov 1947
–March 1948 drafted a charter to establish ITO in
form of the UN special Agency responsible for
developing and administering the comprehensive
International Policy.
11.2
• However the Havana Charter never
went to effect mainly because of
opposition within US. The delay in
creating ITO left GATT as the only
available instrument for establishing
agreement of rules for conduct of
international trade. It became apparent
that the launching of the specialized
agency would be postponed indefinitely.
11.3
• Until its replacement by WTO in 1996 GATT
discouraged unbraided competition through:
• 1. Highly nationalistic policies
• 2. Setting up high tariff blocs as it existed in
the 1930s
• GATT enabled countries to protect their
domestic industry through tariff duties rather
than trade barriers such as quarter foreign
exchange controls.
11.4
• Quarters and non-tariff barriers were to
be applied on a non-discriminatory
basis and for short period of time tariffs
would be reduced gradually through
multilateral
negotiations
in
nondiscriminatory
way
to
stimulate
production.
11.5
• Tariff reduction would be done in accordance
with the most favored nation (MFN) principle.
This meant that goods from GATT member
entering a sister member state would not be
higher than those charged by the latter
country on similar productions from a known
GATT country hence the MFN principle
sought to alleviate the global tariff reductions
and trade to avoid the formation of
preferential trade blocs based on trade
barriers out side GATT.
11.6
• GATT was found on four main principles:
• a) The necessity of conducting trade on a nondiscriminatory basis. This bound all the
contracting parties to the MFN dose in the
application of import duties.
• b) Domestic industry was to be protected by the
customs tariff and not other commercial
measures. The use of import quotas was
prohibited.
• c) There was to be regular consultation to avoid
damage to the commercial interests of various
contracting parties.
11.7
• GATT was to provide a framework for
importing tariffs and other trading barrier the
legal instrument for the enforcement of
results of such negotiation. GATT also
mediated in disputes in disputing parties (but
no enforcement mechanism was put in place)
• The reduction in tariff through multilateral
negotiation and agreements was one of the
tequiniques employed by GATT.
11.8
• 8 major negotiating conferences were
held under GATT auspices: Geneva
1947, Amey 1949, Torquay 1951-52 ,
Geneva 1955-5-61-62, Dillon round,
• kennedy round 1963-67, tokyo round
1973-79, Uruguay round1980-85.
11.9
• Each round had its own success and
each round brought its challenges.
• Evaluation of the performance of GATT
• Score of the success by GATT are:
• quantitative increase in
membership
• decrease in Tarrifs under rounds
of negotiation.
11.10
• GATT rose from 23 members in 1945 to
about 100 in 1990s.Tariff reduction on dutable
goods was achieved through rounds of
average level 1987 of 2,9% in Japan, 4,3%
US, 4,7 for 10 members of the EEC/EU.Tariff
levels in the US before the administration had
averaged 60% in 1934 and 25% in 1945. The
liberal order under GATT practically led to the
growth in export by 20 times and 9 times in
volume and value items in half a century.
11.11
• In the same period world production
grew 10 times in value and volume
terms.
•
11.12
• The Kennedy round was the most
comprehensive conference to date in both
magnitude and scope. It introduces tariffs
negotiations on an across broad basis:
• Anti dumping code
• Agreement regulating trade of textiles
• Efforts were made to assist developing
countries through instruments for boasting
participation and promotion of sustained
growth of their export earnings.
11.13
• However negotiations on agricultural
production were suspended as a result
of deadlock on discussion in Brussels in
Dec 1990. The discussion between the
EU and US officials in 1992 raised
hopes for settlement. The failure by G8
in July that year to make a breakthrough
led to a wide appreciation about the
URUGUAY Round ultimate failure.
11.15
• The controversy on subsidies remained
controversial as ever amid reports of deeprooted differences in negotiation on shipping,
telecommunication and baking.
• In addition leaders of 4 main industrialized
countries were beginning to show disinterest
in the face of Uruguay round and were
concentrating on their interest on the creation
of regional free trade arrangement.
11.16
• WORLD TRADE ORGANISATION
• An organisation formed as a successor
organisation to GATT to oversee multilateral
trading system. It was established on the 1st
of Jan 1995 to cover a variety of matters to
include;
agriculture,
textiles,
services,
intellectual property. Current membership of
the organization includes over 140 countries
accounting for well over 90% of world trade.
Others are in the process of negotiating
membership.
11.17
• Developing countries and the countries
in the process of transition to market
based economies are increasingly
expected to play an important role. The
EU participate in its own right as is the
case for each of its 15 member
countries.
11.18
• The final act of the URUGUAY ROUND
drafted rules relating to:
• Technical barriers to trade
• Trade related aspects of investment
measures (TRIMS)
• Implementation of article VI of GATT
anti-dumping, article VII of GATT (customs
and valuation), reshipment inspection, rules
of origin, import licensing procedures, import
duties
11.19
• International division of labour is such that the
south is largely depended on exporting raw
material and importing manufactured goods.
• Colonial patterns of trade are exhibiting with
terms of trade falling continuously. For
example terms of trade for non-fuel fell 147 in
1980 to 100 in 1985 to 80 in 1990 to 71 in
1992.
11.20
• The UNCED study showed that for 15
middle-income highly indebted countries
there was continual decline in terms of
trade of 28% between 1980-89. Income
losses from falling terms of trade
probably constitute the largest single
mechanism
by
which
economic
resources are transferred from south to
north.
11.21
• The world trading system has been
favoring the exporters of manufactured
goods while proving disadvantageous to
many developing countries whose main
participation in global trade has been
concerned with exportation of raw
materials and commodities and the
import of furnished goods.
11.22
• With over supply of many commodities and
stagnating demand and trend decline in
prices , many developing countries still
depend on commodity exports hence being
trapped in the bad corner of world trading
system.The notion that all are gainers and
there are no losers in trade liberalization has
proven to be over simplistic. Some countries
have gained at all but may well have suffered
severe loss to their economic standing.
11.23
• IN the framework of WTO the developing
countries are concerned about the need to
correct the problems of implementation of the
agreements.
• The clash of interest over substance was
worsened by the lack of transparency in the
multitude of talk held in the small groups that
majority of developing country members have
no access.
11.24
• 1) There has been lack of realization of the
anticipated benefits from the Uruguay Round
by developing countries. A) Tariffs remain
high.B) No gains from supposed phasing out
of textile quotas. 5 years after the phase out
period begun nothing tangible have arisen in
terms of benefits. C) Increase in non-tarriff
barriers e.g. anti dumping. Supposed
improvement of market access through tariff
reductions is being offset by an increase in
non tariff barriers
11.25
• A)
Continued high protectionism in
Agriculture. Protectionism has remained
high in developing countries- USA sugar
244%, peanuts 174%; the EU beef
213%, wheat 168%; Japan wheat 353%
and Canada butter 360%, eggs 230%.
11.26
• 1) implementation problems
• Uruguay round resulted in several legally
binding agreements that require them to
make changes in their domestic economic
policies.
• A)
Having to liberalize their industrial
services and agriculture sectors that cause
dislocations to the local sectors competing
with bigger firms. MNCS will threaten jobs
and livelihoods of people.
11.27
• A)
Curtailed the ability of developing
countries to promote their industries through
subsidies.B) The agreement on trade related
Aspects of intellectual property rights (TRIPS)
will severely under prevent local firms from
absorbing some modern technology.C) The
agreement on agriculture will impose global
competition on the domestic farm sector and
may threaten the viability of small farms that
are unable to compete with cheaper imports.
1128
• A)
The agreement on trade related
investment measures (TRIMS) local
content requirement and
foreign
exchange balancing will be prohibited
this will cause developing countries to
loose important policy options to pursue
their industrialization.
•
11.29
• Unless appropriate systems are established in
developing countries that protect the traditional
knowledge will further be disadvantaged by plant
variety regulation.
• NGOs, governments, farm groups in developing
countries are concerned that the practice of biopiracy (patenting the north of biological material
and resources originating in the south will
intensify. Thus TRIPS needs to be amended to
take into account, developmental, social and
environmental concerns.
•
11.30
• The events in Seattle, Davos seem to
reflect the problems bedeviling the
WTO.
11.31
• WTO TRADE ORGANISATION & TRADE
LIBERALISATION
• The notion that all are gainers and there are
no losers in trade liberalization have proven
to be oversimplitic some countries have them
the others and may well have suffered severe
loss to their economic standing. Economic
integration is thus dividing developing and
transition economies with those that are
benefiting from global opportunities and those
that are not.
11.32
• According to TDR 1999 found that for
developing countries excluding China
the average trade deficits in the 1970s
by 3% points of GDP while the average
growth rate was lower by 2%ge points.
• UNCTAD Report 1999 it led to a sharp
increase in their import propensity but
export failed to keep up the pace.
11.33
• Thus trade liberalisation is carried out in an
appropriate manner in countries that are not
ready or able to cope or which face conditions
that are not favorable, it can contribute to a
vicious cycle of trade and balance of payment
deficits, financial instability, debt and recession.
• The lesson of history is that ultimately all
successful countries develop their own brands of
natural capitalism. As an open regime, on its own,
will not set an economy an a sustained growth
path.
11.34
• Export performance depends on prices of the
existing exported products and also having or
developing the infrastructure, human and
enterprise capacity for new exports. It is also
depended on market access . Here lies a
major problem beyond the control of the
south for as known there are many tariff
barriers in the north for potential exports of
developing countries unless these barriers
are removed the south’s exports potential will
not be realized.
11.35
• For developing countries it should
beloved noted that trade liberalisation
should not be pursued rapidly as an end
in itself or in a big bang manner requires
time.
11.36
• Developing countries must have the
ability, freedom and flexibility to make
strategic choices in finance trade and
investment policy when they can decide
on the rate and scope of liberalisation.
Care also need to be taken to avoid
binding
developing
counties
to
proposed new issues in WTO.